Basic Tax Information Bulletin for Natural Persons

The UAE Federal Tax Authority (FTA) published a Basic Tax Information Bulletin tailored specifically for natural persons, equipping taxable individuals with the detailed knowledge needed to meet their Corporate Tax obligations correctly. This guide summarizes the bulletin’s key points, corrects a commonly circulated rate error, and covers the financial statement requirements that apply once a natural person is registered.

Who Is Liable to Pay Corporate Tax as a Natural Person?

Natural persons are considered taxable under the Corporate Tax Law where they:

• Conduct a business or business activity in the UAE
• Hold a fixed place of business
• Source revenue from the state

Registration and Corporate Tax liability apply only where a natural person’s total turnover from business activity equals or exceeds AED 1,000,000 in a Gregorian calendar year, from 1 January 2024 onward. Below that threshold, no registration or Corporate Tax payment is required on business income. Wage income, personal investment income, and rental income are excluded from this AED 1,000,000 turnover calculation entirely.

Also check: Corporate Tax Services in UAE

What Types of Income Are Taxable?

Corporate Tax applies only to income from a business or business activity conducted in the UAE, and only that income counts toward the turnover threshold. The following remain exempt regardless of amount:

• Wages. Amounts paid to employees, directly or indirectly, in cash or in kind, under an employment contract.
• Personal investment income. Dividends, and gains or losses from buying and selling investments directly, in a personal capacity, not requiring a business license.
• Real estate investment income. Sale, leasing, sub-leasing, and renting of property in the UAE, where a business license isn’t required for the activity.

The Correct Corporate Tax Rate for Natural Persons

Natural persons whose business activity generates turnover above AED 1,000,000 in a Gregorian calendar year are liable for Corporate Tax at the standard rate structure: 0% on taxable income up to AED 375,000, and 9% on taxable income exceeding AED 375,000. There is no intermediate rate bracket, the rate structure is a straightforward two-tier system, not a three-tier one.

Must check: Corporate Tax Registration

The Tax Period for Natural Persons

The Tax Period for natural persons follows the Gregorian calendar year, 1 January to 31 December. The first possible Tax Period for a natural person under this category was 2024.

Registration Deadlines and Late Registration Penalty

A natural person whose business turnover exceeds AED 1,000,000 in a given calendar year must register for Corporate Tax. For example, a person reaching AED 1,100,000 in turnover on 25 July 2024 must register by 31 March 2025, and file a Corporate Tax return by 30 September 2025. Failing to register on time carries a flat AED 10,000 penalty.

What Happens if Turnover Later Drops Below AED 1,000,000?

A registered natural person whose turnover falls below AED 1,000,000 in a subsequent year shouldn’t deregister, provided business activities continue. They retain their Tax Registration Number and must still file a “nil” tax return by the following 30 September.

When Should a Natural Person Deregister?

Deregistration should occur once a natural person no longer conducts business or business activity at all. A deregistration application must be filed within 3 months of ceasing activity. A natural person uses a single Tax Registration Number across all business activities, and should only apply for deregistration once every activity has genuinely ended, not while any business activity continues.

Financial Statement Requirements for Natural Persons

Natural persons registered for Corporate Tax generally must prepare financial statements on the accrual basis of accounting, though the cash basis is permitted where turnover doesn’t exceed AED 3,000,000. Financial statements should be prepared under IFRS, or IFRS for SMEs where turnover is below AED 50,000,000. Where turnover exceeds AED 50,000,000, audited financial statements become mandatory. Tax records must be maintained for 7 years from the end of the relevant tax period, regardless of which accounting basis or reporting framework applies.

Worked Example: Choosing the Correct Accounting Basis

A natural person runs a consulting business with AED 2,200,000 in annual turnover. Since this falls below the AED 3,000,000 threshold, they can elect to prepare financial statements on the cash basis rather than accrual, recognizing income and expenses only when cash actually changes hands, a genuinely simpler approach for a smaller operation. If that same business grew to AED 3,500,000 in turnover the following year, it would no longer qualify for the cash basis and would need to prepare accrual-based financial statements under IFRS or IFRS for SMEs instead, since turnover remains below AED 50,000,000, the audited financial statement requirement wouldn’t yet apply, but the accounting basis itself would need to change.

Corporate Tax Return Filing Deadline

Natural persons who qualify as taxable persons must submit their Corporate Tax return to the FTA no later than 9 months from the end of the relevant tax period, filing a single return covering all business activities subject to Corporate Tax.

Frequently Asked Questions (FAQs)

How Farahat & Co. Can Help

Farahat & Co., a trusted Tax Firm in UAE, helps natural persons determine registration obligations, select the correct accounting basis, and prepare compliant financial statements and Corporate Tax returns.

Contact Farahat & Co. today to discuss your Corporate Tax requirements as a natural person.